Along the optimal path, he
concludes that the MNC benefits from the technology transfer from its parent company in spite
of the leakage of knowledge in the host country, and the host country benefits unambiguously.
Thus, in spite of the free insights competing domestic firms gain, it is still worthwhile for the
MNC to import better technology. This model recognizes that the MNC affiliates are aware of
the technology leakage, and determines technology transfer behavior based on this recognition.
Yet, the behavior of the local firm is still not explicitly taken into account in any calculations.